Bringing a claim - initial considerations

Key issues to consider

What key issues should a party consider before bringing a claim?

There are two key elements that should definitely be considered before filing a claim: the costs assessed against the backdrop of the estimated duration of the proceedings and the probability of success. It is recommended that a party balance the estimated costs of court proceedings against the costs of an out-of-court settlement before submitting a claim to court. If confidentiality is an issue, arbitration might be a good alternative to the ordinary court system.

It must be emphasised that there is no pre-action disclosure under Austrian law. A party intending to file a claim should therefore ascertain whether it has the evidence necessary to prove its claim, as requests for evidence production during proceedings are rather limited (especially compared to document production possibilities in common law jurisdictions).

Establishing jurisdiction

How is jurisdiction established?

Once a claim is filed with the court, the judge examines ex officio whether international, subject matter and territorial jurisdiction exists. In doing so, the court solely relies on the information provided by the plaintiff unless the court already knows that the information provided is incorrect.

The question of international jurisdiction of Austrian courts is either governed by European law (if the defendant is domiciled in another EU member state) or by the Austrian Jurisdictional Code (if the defendant is domiciled outside of the EU). If Austrian courts do have international jurisdiction, any natural or legal person can be sued before the courts of its domicile or legal seat. However, there are a number of alternative venues a plaintiff may choose in specific situations, and for some types of disputes certain courts have exclusive jurisdiction.

In commercial matters, the district courts will be competent if the amount in dispute is lower than €15,000, and the regional courts if the amount in dispute exceeds €15,000 or, irrespective of the amount in dispute if certain matters, such as IP disputes, are concerned. Under both Austrian and European legal provisions, parties can, and often do, agree on a choice of forum in commercial matters. However, the validity of choice of forum clauses is restricted if consumers are involved.

After assessing all claims and documents, the court decides on its jurisdiction; legal remedies can be brought against this decision, mostly in connection with remedies against the final decision.

In general, any objection against the jurisdiction of a court might be possible, for example the existence of an arbitration agreement or clause, lack of international jurisdiction, or lack of ratione loci or ratione materiae (or both). These objections will be assessed in the course of the proceedings.

Preclusion

Res judicata: is preclusion applicable, and if so how?

Rules on preclusion are codified in article 411 of the Code of Civil Procedure. The European Lugano Convention and the EuGVVO determine the recognition and enforcement of decisions of courts in EU member states. If a decision has been made within the EU, a second claim concerning the same subject matter between the same parties would be dismissed. Judgments passed by courts of non-EU member states only have res judicata effect if they are recognised in Austria.

Applicability of foreign laws

In what circumstances will the courts apply foreign laws to determine issues being litigated before them?

In general, Austrian and European conflict of law rules acknowledge choice of law agreements. Austrian law applies without question if both parties are domiciled in Austria and no choice of law exists. In the case of commercial disputes with a cross-border element, the applicable law in question is either governed by Austrian rules on conflict of laws - provided that Austria’s jurisdiction is given and no choice of law exists - or by European regulations.

If at least one of the contracting parties is domiciled in an EU member state, the Rome I and II Regulations determine the applicable law with respect to contractual and non-contractual obligations (such as claims for damages or unjustified enrichment) in civil and commercial matters. Outside the scope of EU law, the Austrian Act on International Private Law provides an answer to the issue of applicable law.

Initial steps

What initial steps should a claimant consider to ensure that any eventual judgment is satisfied? Can a defendant take steps to make themselves ‘judgment proof’?

According to the Austrian Enforcement Act, it is possible to seek preliminary injunctions to safeguard one’s claims via accelerated preliminary proceedings. Parties can apply for preliminary injunctions before the start of, but also during the course of, the proceedings. Whereas these measures are usually taken by the claimant, it is also possible that along with the preliminary injunction, the claimant might be obliged to deposit a security fee, due to the financial risks the defendant faces due to the preliminary injunction.

The only legal opportunity to become judgment proof is insolvency; however, deliberate insolvency might lead to criminal proceedings.

Freezing assets

When is it appropriate for a claimant to consider obtaining an order freezing a defendant’s assets? What are the preconditions and other considerations?

A temporary injunction may be issued if the claimant can prove that there is a probable risk of confiscation of assets. Further possibilities include bans on exploitation and encumbrance. The prerequisite for these measures is the risk of imminent irreparable damage or the thwarting or complication of the assertion of the claim. A possible and common step to safeguard assets is the preliminary injunction (see question 11).

Pre-action conduct requirements

Are there requirements for pre-action conduct and what are the consequences of non-compliance?

There are no legal requirements to initiate any pre-action procedures regarding civil and commercial disputes. However, it is recommended and common practice to request a debtor to fulfil its obligations before commencing legal proceedings. This is because the court may order the plaintiff to bear the court fees and its legal costs if the defendant immediately complies with the claim or does not contest it.

Other interim relief

What other forms of interim relief can be sought?

To prevent imminent danger of irretrievable damage to the claimant, Austrian courts may issue preliminary injunctions before or during litigation. Austrian law distinguishes between the following three types of interim measures: interim measures to secure a monetary claim; interim measures to secure a claim for specific performance; and interim measures to secure a right or a legal relationship.

Monetary claims may be secured, inter alia, by an order for the deposit of money or movable assets, an order prohibiting the sale of movable property, or an order prohibiting the transfer or encumbrance of immovable property. Regarding securing claims for specific performance or rights, measures - such as establishing a right of retention or ordering the debtor to refrain from any action adversely affecting the claim, right or object - are available. Furthermore, it is possible to issue freezing orders on bank accounts or order the attachment of the defendant’s assets. Courts may even order third parties to refrain from paying the debts they owe to the defendant.

Alternative dispute resolution

Does the court require or expect parties to engage in ADR at the pre-action stage or later in the case? What are the consequences of failing to engage in ADR at these stages?

There is no mandatory mediation or alternative dispute resolution (ADR) mechanism for general commercial matters. However, according to article 258 of the Civil Procedure Code, in the course of the first hearing the judge will inform the parties about the possibility to settle their dispute and, if the parties are in agreement, the judge will usually try to settle it in this initial hearing.

Claims against natural persons versus corporations

Are there different considerations for claims against natural persons as opposed to corporations?

To file a claim against a legal person, and in particular a corporation, the claimant must gather essential information about the person or corporation. For corporations, this information includes, inter alia, the identity of the legal representatives and the place of incorporation. It is advisable to obtain an extract from the commercial register before filing a claim against a company.

In Austria, natural persons as well as legal entities have legal capacity. In cases of partnerships (ie, GesbR, KG, OG), the partners themselves - not the partnership, in contrast to legal entities possessing legal personality - may be held liable directly.

Class actions

Are any of the considerations different for class actions, multi-party or group litigations?

Austrian law provides for a specific type of collective redress that is different from typical class actions. The Austrian class action operates indirectly through the medium of a third party to which the multiple claimants will assign their respective claims. This third party is usually a specific association, such as the Consumer Information Association or the Chamber of Employees. Once this association is vested with the rights to bring the claim, that third party will start one proceeding on behalf of the assignors against a single defendant.

That being said, Austrian law prohibits other forms of class actions due to the fact that only a party that has lus standi may act as a plaintiff in a proceeding. Against the background of EU recommendations and various consumer-related scandals, a working group is currently studying the possibility of reforming Austria’s current collective redress system.

Third-party funding

What restrictions are there on third parties funding the costs of the litigation or agreeing to pay adverse costs?

Third-party funding is getting more common and has been explicitly approved by the Austrian Supreme Court. There are, however, no statutory rules governing third-party funding. Thus, there are no restrictions regarding arrangements between funders and litigants and there is no obligation to disclose a funding arrangement. Certain restrictions might apply if attorneys themselves act as third-party funders since contingency and conditional fee arrangements (pactum de quota litis), where a portion of the proceeds are given to the attorney, are prohibited under Austrian law.

Contingency fee arrangements

Can lawyers act on a contingency fee basis? What options are available? What issues should be considered before entering into an arrangement of this nature?

In general, contingency fee arrangements can be permitted in Austria, depending on the exact formulation of an arrangement. Such arrangements may be valid if they provide a basis fee and an additional absolute amount in the event of a positive result in the proceedings. However, if the arrangement provides for no or a disproportionately low fee in the case of a lack of success, the arrangement might be void. Moreover, agreements where the lawyer will be paid a percentage of the proceeds (pactum de quota litis) are prohibited by Austrian law.